During the past 18 months, a big portion of the equity capital markets transactions in Asia has been driven by corporate restructurings, aimed at uncovering hidden value and allowing companies and their controlling shareholders to raise cash.
The reasons and ways of execution vary from case to case, but what links these deals is that issuers are using their existing platforms in some fashion to tap the market.
The listing by introduction of Swire Pacific's property unit, the restructuring of Taiwan Broadband Communications from a portfolio asset into a listed business trust, Great Eagle's recent spin-off of part of its hotel assets through a trust and SM Group's continuing reorganisation of its property assets, are all part of this trend. To be sure, high share prices tend to be the ultimate trigger and that begs the question of whether this may all be over following the sell-off in global equity markets in May and June.
Based on the level of discussions, bankers think not. A group restructuring is not something that you can do in a few weeks and there is talk among bankers of a pipeline of companies that are considering such measures.
Potential deals in the works include a restructuring of Manila-listed Vulcan Industrial & Mining Corp into a holding company for various assets owned by the Alfredo Ramos family and a subsequent backdoor listing of the country’s largest bookstore chain that is owned by the same family.
However, they stress that future issuers will need to set the price according to the new market environment. That means valuations will be less attractive and as a result, some companies will likely look at other ways of raising capital. But for companies where the restructuring has perceived benefits beyond a simple desire to raise cash at a good price, the trend should have more legs. This is particularly true in the less developed markets in Southeast Asia, bankers say.
“Some companies in the Philippines, Indonesia and Malaysia have grown very fast in the past five years and their organisational structures haven’t kept up. They are now realising that they can access a lot of additional value by making their businesses more focused and transparent,” said Arthur van Dijk, a managing director of equity capital markets at Macquarie Capital.
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